Investors looking for stocks in the Financial - Miscellaneous Services sector might want to consider either XP Inc.A (XP) or SoFi Technologies, Inc. (SOFI). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
XP Inc.A has a Zacks Rank of #1 (Strong Buy), while SoFi Technologies, Inc. has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that XP likely has seen a stronger improvement to its earnings outlook than SOFI has recently. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
XP currently has a forward P/E ratio of 10.85, while SOFI has a forward P/E of 75.90. We also note that XP has a PEG ratio of 0.81. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SOFI currently has a PEG ratio of 3.53.
Another notable valuation metric for XP is its P/B ratio of 2.78. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, SOFI has a P/B of 3.47.
Based on these metrics and many more, XP holds a Value grade of B, while SOFI has a Value grade of F.
XP stands above SOFI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that XP is the superior value option right now.
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XP Inc. (XP): Free Stock Analysis Report SoFi Technologies, Inc. (SOFI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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